Wednesday, September 7, 2011

What Have We Lost?

Adam Smith describes the capital of a country in terms of its labor, land, structures, and productive capacity. Countries that can enhance production by necessity enhance their capital.

In the 1930s and thereafter, the federal government introduced programs to keep food prices at a certain level. Milk, orange juice, and a wide variety of other products are priced higher than they should be. One of the programs that keeps prices for the American consumer high is that which pays farmers to not produce.

The Conservation Reserve Program pays farmers rent to do nothing with their land. It costs $2 billion, at least as of 2005, and accounts for 8% of all farm subsidies. The program started as erosion control and ended up as price support.

Here is the question. How negative of an impact does this program produce? By paying farmers to not farm, we place a triple burden on the private sector. First, we use taxpayer money to prevent production and keep prices high. Second, where land is not productive, farmers do not purchase tools, fertilizer, or other agricultural necessities. They also do not employ labor. So the private sector is triply impacted by this program that harms everyone except farmers that want to live off of rent and not their own sweat. To be fair, commercial farmers face more obstacles now than ever before, including a proposed EPA regulation against dust that could wipe many out.

However, we should not be paying anyone to not work. We would be better off buying the produce and throwing it into the ocean than paying people to not work.